Prospect theory and the investor's attitudes toward risk

Shuang Shii Chuang, Min Chang Chang

Research output: Contribution to journalArticlepeer-review

Abstract

This paper investigates the investor's attitudes toward risk. It suggests that the investor's risk attitude should be a mixture of risk aversion and risk seeking, which would be consistent with the prospect theory proposed by Kahneman and Tversky [American Psychologist 39(4) (1984), 341-350]. Two experimental studies proved this proposal. As expected, the results of both studies showed that risk-averse attitudes in the domain of gains (positive risk-return relationship) and risk-seeking attitudes in the domain of losses (negative risk-return relationship), which strongly supported the prospect theory.

Original languageEnglish
Pages (from-to)303-308
Number of pages6
JournalRisk and Decision Analysis
Volume4
Issue number4
DOIs
Publication statusPublished - 2013 Sep 25

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Finance
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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